Loading judgment…
Facts
The assessee, Beekay Steel Industries Ltd., appealed against an order confirming the addition of ₹17,00,00,000/- for unexplained cash credit. The addition was made on account of share capital/premium raised by the company. The AO accepted share subscriptions from directors but treated the balance as unexplained.
Held
The Tribunal held that the assessee is a company in which the public is substantially interested and therefore, the second proviso to section 68 of the Act is not applicable. The assessee had furnished all necessary documents and evidences to prove the identity, genuineness, and creditworthiness of the investors, and the share premium was justified. The non-compliance of summons u/s 131 by some parties was not a ground for addition.
Key Issues
Whether the addition of ₹17,00,00,000/- on account of share capital/premium as unexplained cash credit is justified, considering that the assessee is a company in which the public is substantially interested and has provided all necessary documentation.
Sections Cited
143(1), 143(2), 142(1), 143(3), 14A, R 8D, 68, 131, 2(18)(b)(A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax, Appeal, Kolkata -26 (hereinafter referred to as the “Ld. CIT (A)”] dated 09.01.2025 for the AY 2012-13.
The only issue raised in the various grounds of appeal is against the confirmation of addition of ₹17,00,00,000/- by the ld. CIT(A) as made by the AO on account of share capital/ share premium by treating the same as unexplained cash credit.
The facts in brief are that the assessee filed the return of income on 28.09.2012, declaring total income of ₹24,49,87,560/-, which was
During the appellate proceedings, the ld. CIT (A) called for the remand report from the ld. AO which was confronted to the assessee and assessee replied the said remand report. The ld. AO stated in the remand report that the summons u/s 131 of the Act were not served to all the parties, as in few cases the parties was not available at the addresses given. The ld. AO mainly relied on the fact that the subscribers were not having adequate income to invest, however submitted that they were having resources but those were out of funds raised from the other companies. The ld. CIT (A), after taking into account the contentions and replies of the assessee and remand report, rejoinder filed thereto, dismissed the appeal by following the decision in the case of PCIT vs. BST Infratech Ltd. (2024) 468 ITR 111 (Cal) (HC) and CIT Vs. N.R. Portfolio (P.) Ltd. (2014) 42 taxmann.com 339 (Delhi). The ld. CIT (A) noted that assessee cold not establish the capacity of the investors to invest money for purchase of shares at high premium. The ld. CIT (A) further held that creditworthiness of these investor companies were questionable and explanation offered by the assessee was not satisfactory. Finally, the ld. CIT (A) upheld the order of the ld. AO by confirming the addition made u/s 68 of the Act.
“I. It is humbly stated that the assessee-company filed its return for the A.Y. 2012-13. Subsequently, the case of the assessee was selected for scrutiny. Thereafter, notice under section 143(2) and 142(1) were issued by the A.O and finally assessment was completed by passing the order u/s 143(3) on 30.03.2015 assessing the total income at Rs 41,52,13,220/- by adding the share capital raised by the assessee during the relevant year amounting to Rs 17,00,00,000/- and also adding Rs 2,25,659/- u/s 14A r.w.R 8D. It is pertinent to note that during the relevant year the assessee company had issued20,00,000 shares of Rs 10/- each at a premium of Rs 90/- per share totaling to Rs 20,00,00,000/-The brief facts leading to the above-mentioned addition made by the Ld. A.O. are that the assessee company raised a sum of Rs. 20 crores during the year towards share capital (@Rs 10/-) per share and share premium (@ Rs 90/- per share) from 28 share subscribers. The Ld. A.O. accepted the amount raised from the 5 directors of the assessee company to the tune of Rs 3 crore as genuine but added back the balance Rs 17 crores [raised from 23 share subscribers including two Group Companies, te. Century Vision Pvt. Ltd (Rs. 3.75 crores) & Tirumala Holdings Pvt. Ltd. (Rs. 3.75 crores)]. II. It is humbly submitted that during the assessment proceedings & first appellate proceedings, the assessee-company has submitted the following documents - (i) ITR Acknowledgement, Final account of the assessee company (ii) List of Share Applicants (iii)Allotment Advice (iv) ITR Acknowledgement, final account and Bank Statement of the share applicant companies. (These documents proved that the share capital raised by the assessee- company was genuine) It is further submitted that as per the Balance Sheets of the share applicant companies. the amount of the investment in the assessee-company was much less than their net worth. As such, the identity, genuineness and credit- worthiness all the three ingredients required were proved in the instant case.
After hearing the rival contentions and perusing the materials available on record, we find that the assessee is a company in which public are substantially interested in terms of provisions of Section 2(18)(b)(A) of the Act. We note that the assessee company is listed in U.P. Stock Exchange Ltd. vide approval dated 10.03.2011 and Calcutta Stock Exchange Ltd. vide approval dated 11.03.2011. During the year the assessee company raised share capital /share premium of Rs. 20.00 Cr from 28 subscribers, by issuing 20,00,000 equity shares of face value of Rs. 10/- each at a premium of Rs. 90/- per share ,the details whereof is given on page no.4 and 5 of the assessment order. We note that out of the 28 subscribers, 5 subscribers were directors of the assessee company, who invested in aggregate ₹ 3.00 Cr. The ld. AO during the course of assessment proceedings accepted the investments made by the five director subscribers to the tune of ₹3.00 crores, however, made an addition of ₹17.00 Cr. on the ground that the assessee has failed to prove the necessary conditions laid down in Section 68 of the Act.
We note that the assessee has duly furnished evidences qua the share investors with the ld. AO as well as the ld. CIT (A) comprising copies
As stated hereinabove, the assessee is listed company on two stock exchanges and the assessee furnished before the AO the justification for issuing share at premium which is based upon the strength of the business of the assessee company which appear to be correct. We also note that the proviso to section 68 of the Act as inserted by the Finance Act 2012 w.e.f. 1.2.2013 requires an assessee company (not being a company in which public are substantially interested) in whose book the sums are credited by way of share capital/share premium, to offer an explanation about the nature and source of such credit to the satisfaction of the AO. In other words since the assesse is a company in which public are substantially interested , therefore the proviso to section 68 of the Act has no application and the theory of source of source is not applicable.
We note that the ld. AO, during the remand proceedings as directed by the ld. CIT (A) following direction by the Jurisdictional Hon’ble
We also note that the assessee in rebuttal to remand report submitted that the 12 subscribers on whom the notices u/s 131 of the Act could not be served were active on MCA portal and have been filing the income tax returns regularly. In respect of the group company M/S Tirumala Holdings Pvt Ltd , the reason for non service was that the office of the company was shifted but the return of income filed for the assessment year showed the correct present address of the group company. We note that the assessee has furnished the necessary evidences to testify the same. Hence the summon u/s 131 could not be served on th said group company but complied with when the assessee came to know about it. We also note that the replies received from the subscriber companies in compliance to summons u/s 131 of the Act are available in the paper book Vol-II) Sr. N0. 10.
We also observe that despite 12 years old transactions, the assessee furnished all the evidences/documents qua the money raised with the AO as well as Ld CIT(A) and thus discharged the onus u/s 68 of the
With respect to creditworthiness not being there in case of subscribers, we are of the opinion that the mere fact that they had meagre recurring income is not relevant and creditworthiness cannot be doubtful when their own funds are several times the investment made in the assessee company. The case of the assessee find support from the decision of Hon’ble Delhi High court in the case of CIT Vs M/s Mayawati 338 ITR 563(Del).
Considering the above facts in the light of the decisions as cited above we are inclined to set aside the appellate order and direct the AO to delete the addition.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 30.07.2025.